Accenture Q4 Profit Beats Expectations

Date: 26-09-2008
Source: Investor Business Daily

Accenture gave investors hope amid the fast-moving economic crisis when it beat profit estimates last quarter and gave a forecast above analyst views. The company, which gets nearly a fifth of its revenue from financial services clients, Thursday said per-share profit minus special items jumped 34% from a year ago to 67 cents.

Analysts polled by Thomson Reuters had expected 66 cents. For its fourth quarter ended Aug. 31, the tech consulting giant said net revenue -- revenue minus client reimbursements -- rose 18% to $6 billion, meeting views. Accenture forecast revenue of $6.15-$6.35 billion for the current quarter. Analysts had forecast nearly $6.15 billion. For this fiscal year, it forecast per-share profit of $2.85 to $2.93, the midpoint 10ust above analyst views of $2.88.

Accenture shares were up about 3% after hours, after it released its latest results. "Despite the economic turbulence of the past two weeks, our clients continue to ask for our help," Accenture CEO William Green said in a conference call with analysts. "This environment of economic change and dislocation creates incredible opportunities for Accenture. "We aren't the fat, we are the bone when it comes to these (client) companies." In regular trading Thursday, Accenture shares rose 1.6% to 37.17. Shares hit a 52-week high of 43.04 on Sept. 19. Accenture has 186,000 employees in 49 countries, giving it a broad global reach and helping it to withstand recent economic turmoil.

Accenture is well-positioned due to its "robust global delivery model and strong client relationships worldwide," said Moshe Katri, a Cowen & Co. analyst. He rates the stock outperform, or buy. "Their model is holding up much better than some of their peers," Katri said. But he points out Accenture's latest quarter ended before this month's dramatic collapse on Wall Street. Like other companies, Accenture faces fears of near-term "spending paralysis," Katri said. That concern was echoed in a research note Rod Bourgeois of Bernstein Research issued Wednesday. "The flux in the world's financial system and the related potential for client indecision could create difficulty for Accenture," wrote Bourgeois, who rates the stock outperform. The latest results showed slowing growth in financial services. Accenture said its revenue for that sector was $1.25 billion, up 10% in U.S. dollars and 2% in local currency from the year-ago quarter.

In the previous quarter, its revenue for that sector rose 18% in U.S. dollars and 8% in local currency. But Green expressed confidence about Accenture's exposure to the financial services sector. He said that of Accenture's top 20 clients in the sector, only two have been mentioned in the recent wave of bad financial news. "When you look at the impact on Accenture, frankly it has been modest," Green said. "We're holding our own pretty well in that market." Accenture remains a top investment pick in the tech consulting and outsourcing sector by Goldman Sachs analyst Julio Quinteros, who rates the stock a buy. In a Sept. 17 research note, he warned of flat revenue growth in Europe, but said Accenture still presents "upside potential" for investors.

Accenture's business fundamentals remain strong, says Bryan Keane of Credit Suisse, who rates the stock outperform. "We continue to see signs Accenture is taking significant market share assisting companies in cutting costs and enhancing the top line," Keane wrote. But Wachovia Capital Markets analyst Edward Caso last week lowered his rating on Accenture to market perform from outperform. He cited growing strains in financial services and widespread economic weakness. But Karl Kierstead of Kaufman Bros. says he met with company executives this month. "We heard nothing to make us believe that Accenture's business is weakening," Kierstead wrote in a note.

For profiles of consulting firms, visit our company profiles section.

Click here to return to our homepage.